The IRS has modified its procedures for obtaining consent to change an accounting method related to a qualified foreign plan election under Code Sec. 404A. The IRS specifies that the Code Sec. 481 adjustment period with respect to an election under Code Sec. 404A is 15 taxable years for a positive Code Sec. 481(a) adjustment and 15 taxable years for a negative Code Sec. 481(a) adjustment.
Employers may elect a special set of rules for claiming deductions for contributions to foreign deferred compensation plans maintained for nonresident aliens and for adjustments to earnings and profits pursuant to Code Sec. 404A. If the employer elects the special rules for deductibility, the plan will not be subject to the general rules regarding the timing and allowance of deductions for contributions that apply for qualified plans. This election is available to what is called “a qualified foreign plan.”
Code Sec. 404A(g)(5) provides that, for purposes of Code Sec. 481, an election under Code Sec. 404A is treated as a change in method of accounting. In applying Code Sec. 481 to any such election, the period for taking into account any increase or decrease in accumulated profits, earnings and profits, or taxable income resulting from the application of Code Sec. 481(a)(2), will be the year for which the election is made and the fourteen succeeding years.
The procedure is effective for Forms 3115 filed on or after November 13, 2017. Rev. Proc. 2015-13, I.R.B. 2015-5, 419, is modified (Rev. Proc. 2017-59, I.R.B. 2017-48, November 27, 2017).